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Installation of about 600 million heat pumps covering 20% of buildings heating needs required by 2030

Part of Technology and innovation pathways for zero-carbon-ready buildings by 2030

About this report

This analysis is part of a series from our new report, Technology and innovation pathways for zero-carbon-ready buildings by 2030, and provides the strategic vision of experts from the IEA Technology Collaboration Programmes (TCPs) on how to help achieve some of the most impactful short-term milestones for the buildings sector outlined in the IEA’s Net Zero by 2050 Roadmap; each report’s title reflects one of these milestones. Learn more about the report and explore the TCPs.

Highlights

High-efficiency electric heat pumps are the primary technology driving reduced emissions from heating in the buildings sector in the Net Zero Emissions by 2050 Scenario (NZE Scenario). The number of heat pumps installed globally rises from 180 million in 2020 to around 600 million in 2030. At least three times more efficient than traditional fossil fuel boilers, installation of heat pumps in individual buildings are forecast to rise from 1.5 million per month currently to around 5 million by 2030. 

The fast ramp-up of heat pumps facilitates a complete phase-out of new fossil fuel boilers by 2025 – a key milestone in the NZE Scenario. Heat pumps in combination with energy storage can absorb fluctuations in variable renewable generation, which will enable around 40% of electricity to be produced by solar PV and wind power by 2030. The renovation of the existing buildings stock to the zero-carbon-ready level also enables heat pumps to operate even more efficiently in this segment. 

Relevance

Heat pumps are much more energy-efficient than other renewable and conventional buildings technologies, including low-emission hydrogen and biomass boilers. Once installed and operated properly, one unit of electricity used by a heat pump delivers three to five units of heat on average over the heating season. By contrast, one unit of electricity used by an electrolyser to produce hydrogen, which is then combusted, results in 0.6-0.8 units of heat. The efficiency of a high-efficiency biomass boiler is around 0.9 units. The efficiency of heat pumps has increased steadily over the past decades due to research, competition, minimum efficiency performance standards (MEPS) and energy labelling schemes. Moreover, heat pumps are multi-service providers since they can deliver heating, cooling and dehumidification needs. Different types of heat pumps suit different applications and regions. There are air-to-air, air-to-water, hot water and ground source heat pumps (geothermal). Enhanced design can improve their efficiency even further. For instance, the seasonal energy efficiency can reach 500% to 1000% in commercial buildings for both heating and cooling demand.

Heat pumps can also contribute to meeting national targets for the share of renewable energy in the mix. When coupled with building-integrated PV or powered with off-site renewable electricity, they are a fully renewable solution, making electrification an important lever to phase out fossil fuels. Heat pumps can already be integrated at the district and urban levels. Smart thermostats and active controls can unleash their demand-side response potential and help achieve higher shares of variable renewables in the grid. 

Current state

In several regions, heat pumps already have a considerable market share due to their beneficial total life-cycle cost, especially in the Nordic European countries (e.g. Norway, Sweden, Denmark and Finland), but also in France. In Sweden, 29% of the heating demand in buildings is covered by heat pumps and the corresponding figure for Finland is 15%. In other regions (e.g. parts of the United States and Japan), heat pumps already represent a large share of the heating markets since they can also fulfil demand for cooling. In Japan, a reversible air conditioner is usually the only space heating appliance due to moderate heating demand in comparison to cooling needs. In the United States, about 40% of new single-family homes are heated by heat pumps. In these countries, the market and the value chains are well developed, and end-user awareness and acceptance are both high. In several other countries, the market share is significant for newly-built houses because heat pumps are often the best option to meet energy performance standards set by new building regulations.

Even though the overall penetration is growing, heat pumps are still a rather rare solution for replacing existing heating systems due to higher upfront costs or lack of awareness and know-how among installers and designers. In such countries, purchasing heat pumps is sometimes incentivised and promoted, such as in in Germany, Italy, United Kingdom, United States and the People’s Republic of China (hereafter ‘China’). To increase end-user awareness and acceptance, some programmes include financial incentives but also education on the benefits of heat pumps for consumers. 

Heat pumps are a well-working and mature technology. However, technology and system improvements are needed to integrate them and use their full potential in the net zero emissions energy systems. Heat pump system efficiency and their impact can be improved with smart system integration together with PV, energy storage, control, and e-mobility. In some situations, heat pumps capability to operate flexibly could be more important than reaching top level efficiency. 

In the ongoing global energy crise, heat pumps have been identified as a solution to strengthen energy security. In Europe, the REPowerEU plan presented by the Commission suggests doubling of the deployment rate of heat pumps within the coming years in order to reduce the dependence on Russian natural gas. In the United States, heat pumps have been identified as a prioritised technology in the Defence Production Act (DPA) for the country to take ownership of its clean energy independence.

Challenges

One of the main challenges for the technology is the higher upfront costs compared to fossil-fuel-based heating options. In some regions, this can be compensated for with lower running costs and beneficial total life-cycle costs. Profitability of heat pumps compared to their fossil fuel alternatives is in fact also linked to prices of oil, gas, coal and electricity, which have been at record levels since Russia’s invasion of Ukraine, making their use particularly attractive now. Their competitiveness also depends on the electricity generation mix as well as on how different fuels are taxed and subsidised. Taxes and subsidies should reflect prioritisation of heat pumps (e.g. fees linked to higher saturation of renewable energy sources to be shifted from electricity prices to fossil fuel prices). In comparison to other zero emission technologies, heat pumps are many times, although not always, the most cost-effective alternative on a life-cycle basis. 

Beyond economic reasons, challenges are linked to space restrictions or dimensioning of the heating distribution system, and in some cases replacing radiators with larger units since the efficiency of a heat pump is dependent on the temperature of the radiators and thereby on their size. To this extent, the roll-out of heat pumps goes well with renovation plans for the least performing buildings since this might lead to lower distribution temperatures to satisfy the heat demand, allowing operating heat pumps at higher efficiency levels. However, efficiency of heat pumps should and could still be improved, especially for the coldest outdoor temperatures.

Another challenge could be related to permits to install external units, both for sound and visual reasons.

In addition, even though heat pumps are well known and adopted by end users in some mature markets, the awareness and acceptance are low in many other countries. To be able to multiply the number of heat pumps installed each month, the manufacturers need to scale up deliveries and installers need to be trained in sufficient numbers and quality. The responsibility for this should be shared between the public and private sector. Public authorities should support and encourage reskilling and upskilling of the workforce (including installers, planners, architects, engineers and entrepreneurs) and encourage training schemes organised by the private sector. 

Innovation themes covered by the IEA TCPs

Results of storage integration variants concerning PV self-consumption and grid support for heat pump operation in a high-performance building

Results of storage integration variants concerning PV self-consumption and grid support for heat pump operation in a high-performance building

Sources: IEA HPT Annex 49 – Design and Integration of heat pumps for nZEB and IGS, TU Braunschweig; R&D project "Betriebsstrategien für EnergiePLUS-Gebäude am Beispiel der Berghalde“ (BBSR Fkz SWD – 10.08.18.7-13.33).

Policy recommendations

Strategies

Policy recommendations

Market creation and standards

 

Eliminate the installation of new fossil fuel boilers

Bans. Phase-out of fossil fuels heating in boilers by banning new installations.

Enhance minimum energy performance standards (MEPS) and labelling schemes

MEPS and labels. Promote the development of standards and labelling schemes for smart, flexible operation of heat pumps. Maintain and sharpen (where needed) labelling schemes and MEPS to improve efficiency, and encourage appropriate labelling for different climates.

Planning instruments

 

Integrate heat pumps, storage and electricity grid planning

National energy planning. Develop integrated national energy planning instruments and integrate them in planning procedures to coordinate clean and renewable power generation such as wind and solar power, enable the reinforcement of the electricity grid, provide support for the installation of energy storage in bottleneck locations, and promote the deployment of heat pumps.

Enable electricity consumers/prosumers to communicate with each other and the electric grid

Data communication protocols. Promote the development of standards and open-shared communication protocols for different clean energy technologies, buildings, utilities, EV charging and the electric grid.

Economic and financial instruments

 

Prioritisation of heat pumps through taxation, subsidies and removing subsidies of fossil heating solutions

Carbon tax, emissions trading systems (ETS) and subsidies. Reflect carbon content in energy pricing incentives. Stimulate energy efficiency renovation with incentives (especially for the worst performing buildings), and include heat pumps as part of renovation schemes.

Adopt financial instruments to increase the affordability of heat pumps for low-income/vulnerable inhabitants

Carbon tax, emissions trading systems (ETS) and subsidies. Target subsidies for energy renovations and fossil free, energy-efficient heating and cooling for low-income inhabitants (i.e. using the income from ETS and taxes).

Public support to R&D

 

R&D for heat pump scale-up

Allocate funding. Provide financial support to advance heat pumps performance, aesthetics, user acceptance, flexibility, and integration with other technologies and in different climates.

R&D for improving circular economy

Allocate funding. Earmark funding for recycling and re-use of heat pump materials and components.

Education and training

 

Capacity building

Capacity building for installers of heat pumps. Provide sufficient (numbers and quality) training, qualification and certification of heat pump installers towards one-stop shops heat pumps installation.

Instruments to increase end-user acceptance

Information campaigns. Promote educational campaigns to increase users' confidence in heat pumps technologies and cost benefits.

Analysis